AI Drafter 
TaxTMI 
TaxTMI 
2017 (4) TMI 182
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....ns being Nos. 31 of 2003 and 32 of 2003. Other group of appeals is Appeals Nos. 43 of 2001 and 55 of 2000 and Cross Objection No. 87 of 2003 and the last group of appeals is Appeal Nos. 124 of 2003 and 165 of 2003 where only one question is framed where the Tribunal has held against the assessee and confirmed the order of the Assessing Officer and the Commissioner of Income-tax (Appeals). 3. Counsel for the appellant Mr. Jain, while appearing for the Department, contended that the three questions which are raised for consideration are as under : "1. Whether in the facts and circumstances of the case, the Income- tax Appellate Tribunal was justified in holding that the assessee is entitled for the benefit of deduction under section 80-I of the Act on the machinery which was an old asset and was put to use by the assessee in its old unit has also claimed depreciation on same in the earlier assessment year ? 2. Whether in the facts and circumstances of the case, the Income- tax Appellate Tribunal has erred in law and acted perversely in holding that the forklift truck was on trial run in the old unit and which was ready for use in the new unit should be treated as....
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.... by the Department and contended that the view taken by the Commissioner of Income-tax (Appeals) and the Tribunal is just and proper and no interference is called for. 7. Regarding forklift and others, he has contended that in view of Explanation 2 to section 80-I of the Income-tax Act, forklift is not a plant and machinery as old machinery is entitled for the benefit under section 80-I of the Act, which reads as under : "80-I. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent. thereof : Provided that in the case of an assessee, being a company, the pro visions of this sub-section shall have effect in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel as if for the words "twenty per cent."....
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....espect of any industrial undertaking which is formed as a result of the re- establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section : Provided further that the condition in clause (iii) shall, in relation to a small-scale industrial undertaking, apply as if the words 'not being any article or thing specified in the list in the Eleventh Schedule' had been omitted. Explanation 1.-For the purposes of clause (ii) of this sub-section, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely :- (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India ; (b) such machinery or plant is imported into India from any country outside India ; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the pr....
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....s is not formed by the splitting up, or the reconstruction, of a business already in existence ; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose ; (iii) it is carried on by an Indian company and the work by way of repairs to ocean-going vessels or other powered craft has been commenced by such company after the 31st day of March, 1983, but before the 1st day of April, 1988 ; and (iv) it is for the time being approved for the purposes of this sub- section by the Central Government. (5) The deduction specified in sub-section (1) shall be allowed in computing the total income in respect of the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning or the company commences work by way of repairs to ocean-going vessels or other powered craft (such assessment year being hereafter in this section referred to as the initial assessment year) and each of the seven assessment years immed....
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.... be made. (7) Where the assessee is a person other than a company or a co- operative society, the deduction under sub-section (1) from profits and gains derived from an industrial undertaking shall not be admissible unless the accounts of the industrial undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. (8) Where any goods held for the purposes of the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the business of the industrial under taking or the hotel or the operation of the ship or the business of repairs to oceangoing vessels or other powered craft and, in either case, the consider....
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.... it may think fit, direct, by notification in the Official Gazette, that the exemption conferred by this section shall not apply to any class of industrial undertakings with effect from such date as it may specify in the notification." 8. On the appeal preferred by the assessee, only one question is framed and the counsel for the appellant has contended that all the authorities have seriously committed an error in confirming the orders passed by the Assessing Officer, the Commissioner of Income-tax (Appeals) and the Tribunal in as much as for the previous year, the expenses were allowed fully and in lump sum and the respondent has committed serious error and contended that in view of section 40 which reads as under and the circular of the Department at page 1 para. 74 of the Finance Act which reads as under : "74. It may be noted that the new provision is applicable to all categories of expenditure incurred in business and professions, including expenditure on purchase of raw materials, stores or goods, salaries to employees and also other expenditure on professional services, or by way of brokerage, commission, interest, etc. Where payment for any expenditure is found ....
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.... the assessee in its old unit has also claimed depreciation on same in the earlier assessment year ? Therefore, the issue No. 1 is required to be answered in favour of the assessee. The assessee is entitled to get benefit under section 80-I of the Act. 12. In our view, regarding issue No. 2, which is concluded in view of the decision of the Division Bench of this court, therefore, the assessee will not be entitled for the benefit under section 80-I of the Act and, therefore, the question is answered in favour of the Department and against the assessee. 13. Regarding issue No. 3 regarding lump sum amount taken by the Commissioner of Income-tax (Appeals), the contention of Mr. Jain is required to be accepted. The Assessing Officer by adopting 35 per cent., in our view which is at higher side, even if we accept the profit which has been shown by the assessee from the year 1991-92 to 1996-97, the average of which comes to 31. 4, for that we put the estimate at 32 per cent. instead of 35 per cent. by the Assessing Officer. In that view of the matter, the issue No. 3 is answered in favour of the Department and against the assessee and we estimate profit at 32 per cent. and calculat....